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In San Jose, California, a jury handed down a guilty verdict in the case of Elizabeth Holmes, founder of the blood test startup Theranos. writes Financial Times. They found her guilty on four of 11 counts, namely conspiracy to defraud investors and fraud. At the same time, 37-year-old Holmes was acquitted on four counts, and on three counts the jury was unable to make a decision.
Holmes faces 20 years in prison.
As the CEO of Theranos, investigators say she promoted a notoriously ineffective blood test technology. In doing so, she misled both clients and investors.
The witnesses in the case were the executives of Walgreens and Safeway, who invested hundreds of millions of dollars in the startup, as well as former US Secretary of Defense James Mattis, who was on the board of directors of Theranos. In addition, several patients reported receiving incorrect blood test results.
The defendant’s lawyers tried to convince the jury that Holmes had believed in the success of her project for 15 years. “Elizabeth Holmes was building a business, not a criminal enterprise,” said attorney Kevin Downey to the jury. quotes Forbes.
Holmes started a biotech startup in 2003 at the age of 19. For this, she dropped out of the prestigious Stanford University.
Theranos’ idea was to develop the Edison device that allows you to do tests quickly and painlessly – with just one drop of blood. Holmes considered Apple founder Steve Jobs her idol, and she called the blood analysis system created by Theranos “the iPod in medicine.”
Holmes was motivated to start the company by a fear of medical needles. In numerous talks, she has said that collecting small drops of blood for analysis, avoiding syringes, is a way to attract patients who are reluctant to get tested. This would result in early diagnosis, Holmes believed. Holmes first wanted to make a small device that would test blood for infectious diseases and suggest antibiotics, said Phyllis Gardner, a professor at Stanford School of Medicine, whom Holmes consulted early on. “She was young and had little knowledge of engineering and none at all in medicine,” said Gardner, who quoted newspaper “Vedomosti”. At the same time, Gardner’s husband was on the supervisory board of Theranos and owned shares in the company.
Theranos’ list of investors included media mogul Rupert Murdoch, ex-US President Bill Clinton, and Betsy Devos, who later became Minister of Education in Donald Trump’s cabinet. The company’s board of directors includes former US Secretaries of State George Schultz and Henry Kissinger, as well as General James Mattis. At its peak, Theranos was estimated at $ 9 billion, and in 2015 Time magazine included Holmes in the list of the 100 most influential people in the world.
In 2015, The Wall Street Journal conducted an investigation and found out that Theranos was doing blood tests using third-party equipment, and its own “miracle device” actually does not work: the company performed only 12 out of 200 offered tests on its equipment.
In addition, reports of $ 1 billion in revenue in 2015 turned out to be false – it was only a few hundred thousand dollars. The US Securities and Exchange Commission (SEC) fined Holmes $ 500 thousand and banned her from leading companies for 10 years.
Theranos closed in 2018. By that time, she had accumulated debts, and she had only $ 5 million in bank accounts.
Not only Holmes, but also her ex-boyfriend, business partner and ex-president of Theranos Ramesh Balvani, was under investigation for fraud. The defendants do not admit their guilt.
The Theranos scandal has made it harder for startups to raise investor funds. The situation changed only after the outbreak of the coronavirus pandemic, which demonstrated the importance of medical testing.
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